Saturday, May 11, 2013

Does the ammo shortage point to the future?

I found this video on SHTF Blog. It made me come to a few conclusions/thoughts...

1. Even government agencies can be caught flat footed when it comes to hard goods.
2. This law enforcement agency didn't have the "contacts" to source ammo from Federal or State agencies...or worse, they didn't have extra either.
3. This is a bonafide shortage. The demand has far outstripped the supply. The Democrats keep pushing gun control despite the knowledge that Americans are "gunning up"...this speaks of either conviction on their part or downright fear and the desire to put an end to gun ownership.
4. This might point to a future where actual goods...whether food, water, clothes, tools etc...are considered more valuable than the money to buy them.

My last point should send a chill through the spine of everyone that isn't a hard core prepper (me included). The thought that you can't go out and buy what you need because it can't be found (or easily found) should make everyone think twice.

This is the tin foil hat (some of you will say) future that I see. I ain't happy about it but I'm going to adjust accordingly...especially when it comes to must have items.

Homeland Security has nothing to do with the ammo shortage. The ammo shortages is basically exclusively do to irrationality within the market place with people buying massive stockpiles of ammo(years and in some cases, decades worth of ammo) based on irrational fear. The supply of ammo has gone up and government purchases are about even. The only place where ammo is going is in peoples closets.

Part of the reason the ammo manufactures have been so slow to open new factories is that they know exactly what is happening and have serious fears about the ammo market collapse once the market irrationality stops. They are already pumping out more ammo than is consumes on a yearly basis and their fear is that once the irrationality subsides, any new factories they build will end up mothballed due to lack of demand. In which case, they have thrown money down a hole with little to no chance of recovering it.

The likely outcome of this is you will likely see Local and State LE/governments start doing consolidated contracts with the ammo manufactures similar to the various agencies within DHS doing consolidated contracts with the ammo manufactures. This will in fact end up saving state and local governments significant amounts of money but also likely result in the various conspiracy theorists starting another round of market irrationality.

Once again, there is in fact no actual market shortage. The amount of ammo being produces and distributed currently is significantly larger than the amount of ammo actually being consumed. What is actually happening is that people are hording ammo because of irrationality resulting in the appearance of a shortage. This is further exacerbated by various individuals and entities participating in market arbitrage due to the cost differentials active within the market.

In short, within a matter of years, the current ammo market will likely be studied as an example of market irrationality just like the famous market irrationality of the dutch tulip market.

your theory no longer holds water. as a matter of fact i would label it a form of normalcy bias masquerading as logical thinking.

why do i say that?

because the same issues that you are saying is causing an ammo shortage also caused prices to spike on AR-15's and other types of weaponry. prices on those items has already gone back to near normal whereas the shortage of ammunition continues.

why?

you could say that people are hoarding ammo but life goes on and to say that people currently have the disposable income to suddenly buy cases of ammo in this economy just doesn't make sense. you could say that people suddenly bought new weapons that they needed ammo for but that also doesn't make sense when you consider that unless they're extremely dedicated AND in the prepper community that they would be purchasing cases of ammo. a person new to firearms and not in the lifestyle would at most pop off (and again at most) a few hundred rounds, keep maybe MAYBE a few hundred at home and consider themselves good.

if you're talking about people in the prepper community stockpiling then i say to you that the talk of buying ammo and weapons was happening before the election. those are also gun people. they either have enough, or they won't buy at these inflated prices.

so i ask again. where is the ammo going?

quite honestly when you take a REASONED look at the situation then it comes down to one thing and one thing alone.

THE MARKET SOMEWHERE, SOMEHOW HAS TO BE BEING MANIPULATED. its the only logical explanation.

The production of ammo is up, this is undisputed and verifiable from all the ammo companies. Government acquisition of ammo is at historical norms if not down overall when factoring in local governments, this is also well documented at both the federal, state, and local level.

The market IS acting irrationally and is buying up large amounts of ammo, but it is in the private and mostly individual purchases. What market manipulation there is, is at the hands of private buyers that are using arbitrage to make money within the irrational market by buying low via public sales at various stores (Walmart et al) and selling high via various public auction and listing services.

The weapons themselves and their market is only tangentially related to the ammo market. Each weapon bought can realistically use 5K-10K rounds before needing replacement and therefore the ammo takes significantly more resources and production than the actual weapons. Also keep in mind there were on the order of 300-400 million weapons out there before the general market irrationality set in.

As far as people hording ammo, yes it is happening and no it isn't just the fringe preppers. Lots of normal people are caught up in the market irrationality of ammo and are hording ammo. It happens pretty normally in markets where there is a perceived shortage. Someone goes to buy some, finds that they are out and then proceeds to buy more than they actually need when they do find some. At a smaller scale, this happens at grocery stores whenever a large storm is incoming to an area.

So no, the market somewhere, somehow isn't really being manipulated besides a small amount being used in various arbitrage schemes by private individuals. The ammo manufactures quite literally are producing ammo and distributing ammo to private dealers at levels quite a bit higher than historical norms. Let me repeat that, the amount of ammo going into the private market is quite a bit higher than the historical norms, even short term 5 and 10 year norms. For emphasis, more ammo is going into the private market(aka non-governmental) than has ever gone into it before. This isn't a supply issue, this is an irrational demand issue. Much more ammo is being bought by the private market than in the past. Much more ammo is being bought by the private market than was or is being used.

Once the market irrationality subsides there will in fact be a large glut of ammo within the market. This is one of the main things keeping the ammo manufactures from building new plants, by and large. They do not believe that the current demand for ammo is sustainable, and unless everyone starts actually using much more than historically on a per capita basis, they are certainly right.

you just said the same thing but in a slightly different way but you added one thing that i will dispute.

you say the US Govt isn't buying more ammo? yet while saying that you and others that are pushing the same line can't explain why the DHS would at this time (they didn't do it before the rush) decide to make orders of an unholy amount of ammo.

individuals buyers cannot be the reason for the shortage. producers of ammunition world wide are seeking to cash in on this situation. if their products can't make it to market because suddenly ATF and Customs have decided to be even bigger dicks then that's market manipulation.

but its quite clear from the DHS order book, the President stating that he would do everything in his power to control guns, his historic view of weaponry in the hands of citizens and the ATF's complicity in the gun bill as proposed by Diane Fienstien that the US Govt is indeed behind this unfortunate shortage.

I'll start first with your new fallacy. The DHS is ordering roughly the same amount per year that they have always ordered. The cut new IDIQ contracts because their old ones were expiring. This is a practice dating back to the first major bulk IDIQ contract dating to 2007 (aka before obama). DHS went to their large omnibus IDIQ contracts in order to save money (something any conservative should actually be thankful and congratulating them for doing). These current IDIQ contracts are inline with previous buying levels for the collective DHS agencies taking part in the IDIQ contracts. So, the ammo levels that DHS is acquiring are effectively in line with their historical purchases modulo their increase in personnel.

Individual buys ARE the reason. Ammo manufactures are shipping more ammo to the private market than they ever have. Last year was a record year for shipments to the private market and this year will be even larger. In addition, imported ammo is up 100% in volume compared to the previous year. Imported ammo is also pretty much 100% private market volume. There is no evidence that even suggests the imported ammo is taking longer to clear customs than it historically has.

So the DHS order amounts are in line with historical amounts, more imported ammo is coming in than ever before, and ammo manufacturers are shipping historical record amounts to the private market, and yet demand is eating all of it and wants more. Just to put things in perspective, the increase in imported ammo shipments for the first 3 months of this year, is about equal to 2 years worth of maximum quantity for DHS IDIQ contracts (and they've never approached the maximums on their IDIQ contracts, rarely getting much about 50%).

More ammo is making it to the private market than it EVER HAS BEFORE. The amount of ammo making it to the private market this year will likely be greater than 1 billion rounds more than the previous year (the increased importation rate alone will account for 1 billion rounds increase this year if it maintains current levels). And last year was also up significantly from the year before it.

In short, the US government has almost nothing to due with the actual shortages. The only link between the US government and the shortages is ancillary in that the US government considering new legislation is partially responsible for people creating an irrational market because people are being quite irrational. All actual shortages are being cause by people irrationally buying every round of ammo they see regardless of their actual real demand/need for that ammo. In effect, the private citizens are sitting on several years worth of actual ammo usage based on the buying rates and historical use rates for ammo.

Effective demand for ammo is at least 40% greater than it has been in the past. The shortages are entirely demand created and entirely due to the private non-federal market. Anyone saying otherwise isn't looking at the actual data and instead is getting riled up based off of factually incorrect information which is widely rampant at this time for anything related to guns and ammo. Need I remind you of the various fear mongering articles about the DHS buying multi-billions of rounds of ammo with no actual basis in fact beyond some people's inability to actually read government requisition solicitation forms?

The information sphere is rife with enough incorrect and false information to create fear that more is certainly not needed nor healthy. Lets deal in actual data and facts and not fear mongering based off of no evidence.

So in short, the USG is not behind the shortages. The people behind the shortages are our fellow 2nd amendment supporters.

IDIQ contract? i'm not even going to take the time to look that up.....buying levels are the same for the DHS? i'm not about to fall for that line of bullshit. demand for ammo is up 40%???? i'll say it again cause you're not listening---there was increased demand for firearms but that has abated so the same should hold true for ammo.

you're not changing my mind, i'm not changing yours so i won't "continue this dialogue"....we're playing for different teams.

IDIQ = indefinite delivery, indefinite quantity. It is a standard procurement contract term used both within the US government and private industry. IDIQ contracts generally specify both a minimum and a maximum quantity per year and run for several years. It is useful for locking in a price for items that you will be buying over many years but don't know the exact quantities that will be required. They are used for everything from ammo to pencils and pens.

And yes, buying levels for DHS are basically the same:http://www.breitbart.com/Big-Government/2013/04/04/The-Great-DHS-Ammunition-Stockpile-Mythhttp://www.coburn.senate.gov/public/index.cfm?a=Files.Serve&File_id=9cde768f-bb3a-4fd9-8176-1745c21519c2

And yes demand for ammo is up at least 40%. Actual imports of ammo are current up over 100%, and domestic production is up 20-30%. Current year estimates for US total available ammo for is around 12-14 billion rounds compared to the historical levels of 8-10 billion rounds.

And sales of firearms != sales of ammo because yearly sales even in these times of hefty demand are a small fraction of in circulation firearms. Before this demand spike occurred with both firearms and ammo there were an estimated ~320-330 million firearms within the US(for reference there were approximately 310 million guns in private hands in 2007 and 274 million in 1996). Annual firearm production is ~10% or less of the in circulation number. Which is why the tail for demand for ammo is much longer than the tail for demand for actual firearms. This should be simple common sense.

We may be playing on different teams, but if so, then those teams are me on the side of actual facts and figures and you on the side of imaginary hysteria numbers.

I support gun ownership, I think that select-fire weapons should be legal for manufacture and sale to civilians, that pretty much any weapon that the USG can buy should be able to be bought by civilians. I often wonder where all these recent gun rights supporters have been for the past 90+ years...

I don't think that gun rights are supported by false rumor, innuendo, and hysteria, but on cold hard facts. The more that we rely on cold hard facts the faster that we can get the long standing unconstitutional laws removed. The hysteria and rumor does nothing but paint gun supporters and owners as out of control lunatics, which does not serve our cause at all.

where all the recent gun rights supporters have been for the past 90plus years?????

really?

why are you so invested in this issue that clearly has the gun community divided? i toss the statement that you're a DHS stooge and you ignore that and keep throwing around so called facts that i can refute with my own. Brietbart ran that story one time and hasn't run it again. as a matter of fact other news sources are beginning to push the idea that DHS IS behind the problem. but that's irrelevant now. whats your deal?

Where have the gun rights supporters been is because until recently there wasn't a big brouhaha even though select-fire weapons have effectively been illegal since the roaring 20s.

The gun community is only divided on this issue because of false and incorrect reporting, rumor, and innuendo.

As far as DHS, I've never worked for the government a day in my life. Why should I response to baseless slander.

You have yet to refute a single one of my facts or data points, fyi.

And there are plenty of so called "news" sources still parroting factually incorrect information. The news sources that are pushing the idea that DHS is behind it are also the same news sources that lack the ability to actually fact check their own articles concerning the amount of ammo that DHS is actually buying.

My deal is that re-posting factually incorrect data, rumor, conjecture, and innuendo does the side of gun rights not a wink of benefit. It is entirely detrimental to the factual arguments and undermines the credibility of the arguments of gun rights. We don't like it when the other side does it even though it undermines their arguments and likewise we shouldn't do it.

"The likely outcome of this is you will likely see Local and State LE/governments start doing consolidated contracts with the ammo manufactures similar to the various agencies within DHS doing consolidated contracts with the ammo manufactures. This will in fact end up saving state and local governments significant amounts of money"

I have NEVER seen a "national procurement project" that was cheaper than googling the product.Never. Never ever ever.And I've paid suppliers through hundreds of procurement contracts, from paper and ink, to bricks and mortar, to laptops and office chairs."Preferred Supplier" = License to roger them senseless

DHS is paying less for HP ammo than you would of been able to by equiv caliber ball for a year or more ago. The DHS IDIQ contracts are competitive bid contracts with pricing much better than what could be gotten on the open market. DHS is paying under 30 cents per round for high quality HP .40 ammo, that is a fair sight better than they would of been able to get via google.

he seems mighty invested in defending those jackasses in Homeland Security doesn't he? the second most hated agency in the US govt (only behind the equally stupid and even more jackbooted thugs in ATF) and its almost like he feels an unnatural need to defend them. must be either a rookie agent or a middle manager thats drank the koolaid

Or I don't know, I could simply be someone who relies on actual facts and figures that are and have been provided both through public procurement requests and via sworn testimony.

The fact of the matter is DHS is paying a pretty incredibly low price for JHP .40 S&W. If you think you can beat their price, I'll buy 5K blocks any day of the week from anyone for the DHS price you don't believe.

Ats.So have you seen the invoices?Or have you read DHS press releases saying "We get a great deal"?Simple question

See, I know the government agency that employees me currently pays £348 per year for blackberry, because the bill goes through my desk.http://store.three.co.uk/view/product/ql_catalog/threecatdevice/2462Rather cheaper from there, but we have a "great low cost national deal"

So what you are saying is that you havent seen the invoices then?I ask, because my employer uses a contract, which it swears is one of the most cost effective in the country.Its not, but they would swear blind it is.

bah, making dig through the congressional record documents that google is a pain about...

Found it: http://jeffduncan.house.gov/sites/jeffduncan.house.gov/files/White%20Paper%20on%20DHS%20Ammunition%20Procurement.pdf

second page, second bullet: 24.3 cents per round.

At a quarter per round, one would be hard pressed to find new tier 1 manufacturer 180gr .40 S&W FMJ at that price pre-shortage, let alone tier 1 manufacturer JHP.

Additional reference points from sworn testimony before congress:Page 5 after first heading: http://oversight.house.gov/wp-content/uploads/2013/04/Nayak-Medina-DHS-Testimony-4-25-Ammunition-COMPLETE.pdf

Links to the above sworn testimony document and other from Congress's hearing of ammo procurement and use can be found at the official site for the hearing: http://oversight.house.gov/hearing/oversight-of-the-federal-governments-procurement-of-ammunition/

TrT, there is plenty of documentation for the price paid by DHS for ammo including sworn testimony before congress.

I don't know what else you want, sworn congressional testimony of a specific fact is about as rock solid of a data point that is available in any sphere. It isn't like their is any ambiguity when quoting a bottom line item cost value.

Once again, as far as your phone contract, it really depends on what the actual parameters of the contract are. I've known friends of the family that have worked for the USG at various times (NTSB and NRC) which had phone contracts that at face value seemed a little high until you actually realized that they were all inclusive unlimited worldwide unlimited voice/data service contracts (which for their jobs were actually required, first response/investigative teams that would fly anywhere there was an incident and stay until everything was done), at which point they were a steal (aka their were on the high side for top end limited domestic voice/data plans but were in fact worldwide unlimited voice/data).

One of the YouTubers I follow has a flint lock as one of his preps. He says soft lead is everywhere and he can make black powder.

Made me wonder whether there is a market for a "flint lock" that uses a modern long lasting material in place of flint to make the spark. Modern barrels would last age fed a diet of soft lead. Lubricant for the bullet wouldn't be too much a problem our forebears used animal fats. Just a thought.

and that's the latest problem with this 'crisis' ... people are starting to get inventive. i have a high powered ADULT pellet gun that can take small animals....others are doing the same....still other people are moving to things like you talked about. honestly, all they're doing is helping people diversify there armories a bit more and put even more weaponry in the hands of the public.

oh and only 10percent of the public participated in the war of independence so what happens when 40 percent of Republicans believe that domestic conflict is probable???

Is it me or has there be an increased interest in the various forms of archery in the US?

You are also lucky in the US that when it comes to air rifles there are no silly energy limits that we have here. When I say limits I mean license threshold. Modern pre-charged rifles in 30ft/lbs range are a different beast to the 12ft/lbs rifles UK-license-free with their banana trajectories many use here.

I keep saying in my discussions with anti-gun Americans what they should really watch isn't NRA membership but gun sales. The latter is the true indicator of what the people are thinking. Just because the liberal media are screaching this, that, and the other it doesn't mean they speak for the people. Empty vessels make the noise.

spot on again Steve! but what should scare people even more are those individuals that no longer believe in the political process...those people that have bought guns, are actively training with them (and archery equipment...you just made me think that i should look at crossbows) and don't believe that the government acts in the interests of the people.

that number is growing.

people are pissed and the "ruling" class don't seem to get it. things are gonna pop in a bad way. if you have rioting in the US it'll make what you saw in Southern Europe look like a big party. people will die here and it'll take the National Guard to put the lid back on.

Do you think the authorities will be able to Guard, Army, Corps, or state level LEOs? I know there always some who will follow orders whatever happens. But if one thirds says no, a third says yes, and a third doesn't know then nothing is going to happen. If all takes to keep order is disciplined well equipped armed group on your side then Chicago and LA would be safe well ordered places.